As the public sector workforce becomes more ethnically diverse and as government agencies make attempts to "manage" that diversity, the importance of understanding how diversity affects workplace interactions and work-related outcomes increases. Little public sector research has examined the impact of diversity on performance outcomes. This paper seeks to fill this gap by studying the effects of the ethnic diversity of managers and street level bureaucrats on work-related outcomes. We use basic in-group/out-group theories from psychology to form hypotheses relating diversity to performance. The results of diversity research using social identification and categorization theory and similarity/attraction theory led us to form the hypothesis that greater levels of ethnic diversity among public managers and street-level bureaucrats will lead to lower organizational performance, when the task requires significant coordination and collaboration. Diversity research that uses the information and decision-making theory, while scant, led us to form a second hypothesis that greater levels of ethnic diversity among public managers and street-level bureaucrats will lead to higher organizational performance, when the task does not require significant coordination and collaboration. Our results were mixed. We found support for the first hypothesis with respect to street-level bureaucrats but not for managers. The results did not support our second hypothesis -- we actually found an opposite relationship for street-level bureaucrats from what we expected. Overall, the results support previous research that suggests that increased levels of ethnic diversity can lead to process-oriented difficulties in the workplace and negatively affect workrelated outcomes. Working Paper 06-33